Hartford Business Journal

16 Hartford Business Journal • May 28, 2018 • www.HartfordBusiness.com By Matt Pilon mpilon@HartfordBusiness.com T he overseers of the XL Center in Hartford say the venue is feeling the sting, in more ways than one, from a 10 percent state admissions tax that kicked in six months ago. The levy has played a role in the 16,000-seat arena striking out on as many as a dozen events, mainly concerts, that it bid on, according to Michael Fre- imuth, executive director of the Capital Region Development Authority (CRDA), XL Center's management overseer. The situation has put further financial strain on a venue that's lost money in at least each of the last four years, and is projected to do so again this year. The problem, Freimuth said, is that the tax curtails a show's potential profit margin "by such a degree that it results in the building losing actual events and the subsequent revenues." Those lost concerts and shows could have amounted to as much as $650,000 in revenues for the arena spread across the current and coming fiscal year, Freimuth said. It also means fewer hours worked by XL Center staff, less state tax revenue, and slower business for nearby park- ing-lot operators, restaurants and bars. The admissions tax impact is being felt ahead of the slated August opening of the MGM Springfield casino, which is expected to present increased competi- tion to Connecticut venues for concerts and entertainment. Casinos are more inclined to grant artists big revenue guarantees, which makes it easier to at- tract acts, because they earn the money back at gaming tables and slots. CRDA is also seeking a private buyer for the XL Center, at the legislature's direction. An RFP went out in late April, with responses due in late June. It's not yet clear how potential bid- ders view the tax, but Freimuth said it would affect any bidder's calculations regarding return on investment. "It takes money out of the bottom line, so that will impact anyone play- ing the very simple ROI game," he said. XL impact Connecticut first created its admis- sions tax in the early 1970s. It covers certain sporting events, theaters, mov- ies and amusement parks. But legislative exemptions have meant the tax hasn't applied to all venues equally over the decades. The XL Center (formerly called the Hartford Civic Center), first received an admissions tax exemption in the early 1980s, which held until lawmak- ers repealed it in 2011. The venue was exempted again in 2014, with lawmak- ers reversing that decision last year. Bridgeport's Webster Bank Arena and minor league baseball games at New Britain Stadium and Dunkin' Donuts Park also lost tax exemptions last year. Meanwhile, the Oakdale Theatre in Wallingford has been paying the tax all along, while live performances at vari- ous nonprofit theaters remain exempt. Admissions taxes brought approxi- mately $14.2 million to state coffers in fis- cal year 2016, according to state figures, and the recent elimination of exemptions is expected to raise an additional $4 mil- lion over two fiscal years. CT Admissions Tax Revenues 2014 2015 2016 2017 Movie admissions, 6% tax $5.4M $5.2M $5.6M $5.6M Other admissions, 10% tax $10.5M $8.4M $8.6M $9.8M Source: Department of Revenue Services Tax Off, Tax On Officials say a new admissions levy is costing the XL Center shows and revenues at a crucial juncture Fans hold up lighters during a May 21 Journey concert at the XL Center in Hartford. The venue's overseers are concerned that a recently enacted state tax is making it tougher to book acts. HBJ PHOTOS | STEVE LASCHEVER

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